Darn! Tax return was less than we were planning.

[BensWife]

That is going to effect our trip to WDW. We were planning on getting the same amount on our return that we had last year. However, it was only 1/3! I guess either taxes went up, or not having as much in childcare deductions this year really hurt us. Now we have to dip into our savings for the trip. We knew it was a possibility, and we are ok with it since that is what we were saving for. But, I was really hoping that we didn't have to use it. I would have liked to have just kept it in savings for a rainy day. DH is going to get his bonus in a couple weeks. He got a good review which is supposed to get him more in his bonus. That along with a really good year for his company, hopefully, his bonus can make up for what we didn't get back in our taxes. I sure hope so.

 

[starry_solo]

Did you change your exemptions (W-4 form or whatever comparable form you have with the state)? I changed mine when I got what I thought was a large refund from the feds last year and this year only got 1/5th of what I got last year. That might also be a reason why your tax refund isn't as much.

Now I need to change the state one again....

 

[MomToOne]

Did your DH get a bonus for the first time last year, or a bigger than usual one? My company doesn't withhold federal or state taxes from bonus checks, and if you don't get your exemptions right the rest of the year to properly account for that (which is hard, since bonus amounts can vary), then you basically get hit with the tax bill on it when you do your return...

 

[disneychrista]

My company doesn't withhold federal or state taxes from bonus checks,

WOW. The IRS says they are to withhold 25% federal tax on bonuses and (at least in California) 9% State. I know I get phone calls from new employees when they get their first bonus check and it is much smaller than they think. When adding SDI & SS the check is about 60% of gross.

 

[rlduvall]

It also could have been that you income went up just enough to put you in a higher tax bracket, which could also reduce alot of the tax credits you might have received, i.e. child tax credit, childcare tax credit, etc. I always tell my DH that we are the "affluent poor."

 

[gracie1]

WOW. The IRS says they are to withhold 25% federal tax on bonuses and (at least in California) 9% State. I know I get phone calls from new employees when they get their first bonus check and it is much smaller than they think. When adding SDI & SS the check is about 60% of gross.

It depends on the size of the company for the 25% whithholding. My mom works for a hospital and their bonuses have the 25% withholding. My company does not have to withhold 25% because there are only 5 of us that get it. I personally think it's ridiculous to tax someone's bonus 25%.

 

[smj2610]

25% tax would be nice on bonuses my company takes a standard 30% tax on bonuses. Makes the bonuses look so small

 

[meajuly5]

Best way to avoid the bonus tax is to stick it in your 401k instead of taking it. Not the most fun and not always possible but it avoids paying the high tax or the bill in April.

 

[wvjules]

That is going to effect our trip to WDW. We were planning on getting the same amount on our return that we had last year. However, it was only 1/3! I guess either taxes went up, or not having as much in childcare deductions this year really hurt us. Now we have to dip into our savings for the trip. We knew it was a possibility, and we are ok with it since that is what we were saving for. But, I was really hoping that we didn't have to use it. I would have liked to have just kept it in savings for a rainy day. DH is going to get his bonus in a couple weeks. He got a good review which is supposed to get him more in his bonus. That along with a really good year for his company, hopefully, his bonus can make up for what we didn't get back in our taxes. I sure hope so.

And that is a prime example of why someone should never depend on a tax refund (either coming in time for a purchase, or the expected amount) or a bonus to fund any purchase. Those items should never be included in any budget. When you get them that's great. But one should never depend on them...EVER.

 

[ManyMinnie]

It depends on the size of the company for the 25% whithholding. My mom works for a hospital and their bonuses have the 25% withholding. My company does not have to withhold 25% because there are only 5 of us that get it. I personally think it's ridiculous to tax someone's bonus 25%.

DH's bonus is taxed at close to 50%, so those that only get a 25% tax, consider yourselves lucky.

 

[crashbb]

Question about those saying that their company taxes bonuses at a high rate and that those getting taxed at 25% should feel lucky. Are you actually saying that your company can choose how much taxes to take from you? Isn't it really just how much they withhold? The total amount taxed is set by the Government, is it not? The only difference is WHEN that tax is paid. And, given the number of people who try to maximise their refunds, a higher rate of withholding would be a good thing (to them).

I can only avoid withholding on my bonus if I dump it into my RRSP (our Registered Retirement plan) but only if I participate in the company RRSP. I don't, so they take out about 30% of my bonus as withholding.

 

[Pakey]

Question about those saying that their company taxes bonuses at a high rate and that those getting taxed at 25% should feel lucky. Are you actually saying that your company can choose how much taxes to take from you? Isn't it really just how much they withhold? The total amount taxed is set by the Government, is it not? The only difference is WHEN that tax is paid. And, given the number of people who try to maximise their refunds, a higher rate of withholding would be a good thing (to them).

I can only avoid withholding on my bonus if I dump it into my RRSP (our Registered Retirement plan) but only if I participate in the company RRSP. I don't, so they take out about 30% of my bonus as withholding.

The minimum is 25% Federal; each state is different for SIT. I have to take 11.4% State plus FICA and Medicare, etc.

The IRS allows the employer to calculate the Federal withholding at an override amount of 25% or the amount that the payroll system will calculate it at as long as it's at least 25%. Because most payroll software annualizes, the system will take the bonus amount and multiply it by the number of pay periods in a year and come up with an annualized salary which could put it into a higher tax bracket than 25%. I calculate the exec bonuses at my firm and I manually calculate at 25% because the software override would take more than that and the executives wouldn't want that!!!!!

Those saying 50% are probably including all tax withholdings, not just FIT.

 

[gracie1]

The minimum is 25% Federal; each state is different for SIT. I have to take 11.4% State plus FICA and Medicare, etc.

The IRS allows the employer to calculate the Federal withholding at an override amount of 25% or the amount that the payroll system will calculate it at as long as it's at least 25%. Because most payroll software annualizes, the system will take the bonus amount and multiply it by the number of pay periods in a year and come up with an annualized salary which could put it into a higher tax bracket than 25%. I calculate the exec bonuses at my firm and I manually calculate at 25% because the software override would take more than that and the executives wouldn't want that!!!!!

Those saying 50% are probably including all tax withholdings, not just FIT.

I was thinking the same thing, the 50% is with all taxes included. Which is just about right. The bonus that my mom gets she only gets half of it with all the regular taxes plus the 25% additional tax.

 

[rlduvall]

My company takes about 40% total from our bonuses.

Remember, even if that is probably too much based on your current income tax bracket, when you file your income taxes for that year you will either get more back or not owe as much. Win/win in my mind.

 

[ManyMinnie]

I was thinking the same thing, the 50% is with all taxes included. Which is just about right. The bonus that my mom gets she only gets half of it with all the regular taxes plus the 25% additional tax.

Yes, that includes all taxes.

 

[kkandaj]

My company takes about 40% total from our bonuses.

Same here--with all taxes included.

 

[gracie1]

I'm glad that I don't have that at my company. But I personally still think it's wrong to increase the tax because of the bonus you received.

 

[crashbb]

The minimum is 25% Federal; each state is different for SIT. I have to take 11.4% State plus FICA and Medicare, etc.

The IRS allows the employer to calculate the Federal withholding at an override amount of 25% or the amount that the payroll system will calculate it at as long as it's at least 25%. Because most payroll software annualizes, the system will take the bonus amount and multiply it by the number of pay periods in a year and come up with an annualized salary which could put it into a higher tax bracket than 25%. I calculate the exec bonuses at my firm and I manually calculate at 25% because the software override would take more than that and the executives wouldn't want that!!!!!

Those saying 50% are probably including all tax withholdings, not just FIT.

Right. But at the end of day (well, end of the tax year), the amount that the company takes off when handing out the bonus doesn't change the total amount of taxes that someone pays, right? I mean, it isn't as if the company is actually pocketing any money, so how they do it doesn't change the final bottom line, right?

 

[tar heel]

OP - child care is a CREDIT not a deduction, so a change can have a huge effect on your taxes.

 

[Mouse House Mama]

And that is a prime example of why someone should never depend on a tax refund (either coming in time for a purchase, or the expected amount) or a bonus to fund any purchase. Those items should never be included in any budget. When you get them that's great. But one should never depend on them...EVER.

Why does there always have to be a "well la di da" post? The OP was just mentioning her diappointment. The tax returns are different this year. A lot of people felt it. It doesn't mean that just because you were expecting a certain amount and didn't get it you can't be disappointed.

OP- I don't blame you. I would be a bit let down too. It seems the more you work and do well the less you get to actually keep.